a-25-13.pdf

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ANNOUNCEMENT AND REPORT
C
ONCERNING
A
DVANCE PRICING AGREEMENTS

March 27, 2025

This Announcement is issued pursuant to § 521(b) of Pub. L. 106-170, the Ticket to Work and
Work Incentives Improvement Act of 1999, which requires the Secretary of the Treasury to
report annually to the public concerning advance pricing agreements (APAs) and the Advance
Pricing and Mutual Agreement Program (APMA Program), formerly known as the Advance
Pricing Agreement Program (APA Program). The first report covered calendar years 1991
through 1999. Subsequent reports covered each calendar year 2000 through 2023 separately.
This twenty-sixth report describes the experience, structure, and activities of the APMA Program
during calendar year 2024. It does not provide guidance regarding the application of the arm’s
length standard.

Part I of this report includes information on the structure, composition, and operation of the
APMA Program; Part II presents statistical data; and Part III includes general descriptions of
various elements of the APAs executed in 2024, including types of transactions covered, transfer
pricing methods used, and completion time.

John M. Wall
Director, APMA Program

Part I. The APMA Program – Structure, Composition, and Operation
[Pub. L. 106-170 § 521(b)(2)(A)]

In February 2012, the former APA Program was moved from the Office of Chief Counsel to the
Office of Transfer Pricing Operations
1
within the Large Business and International Division of
the IRS and combined with the U.S. Competent Authority staff responsible for transfer pricing
cases, thereby forming the APMA Program (APMA).

As of December 31, 2024, APMA’s APA cases were handled by a staff of 126, comprising 76
team leaders, 35 economists, 12 managers, and 3 assistant directors.
2
Each assistant director
oversees four managers who lead teams consisting of both team leaders and economists.
APMA’s main office is in Washington, DC, and it also has offices in northern California,
southern California, Florida and the Boston, Chicago, Denver, New York, and Seattle
metropolitan areas. A list of primary APMA contacts is available at
https://www.irs.gov/businesses/corporations/apma-contacts
.

On August 31, 2015, the current revenue procedure governing APA applications was published
in 2015-35 I.R.B. on page 263. Revenue Procedure (Rev. Proc.) 2015-41 provides guidance,
information and instructions on APA requests and the administration of APAs. Rev. Proc. 2015-
41 updates and supersedes Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-
31, 2008-1 C.B. 1133, which is also superseded.

The model for APAs covered by Rev. Proc. 2006-9 was updated to serve as the current model
APA for APAs covered by Rev. Proc. 2015-41 (instead of the model APA that had been issued
with Rev. Proc. 2015-41). The model APA that is included as Appendix 1 to this report remains
unchanged since last year’s report.

1
In 2017, Transfer Pricing Operations became Treaty & Transfer Pricing Operations (“TTPO”).
2
In late 2020, TTPO’s Treaty Assistance and Interpretation Team (TAIT) joined APMA, bringing the total number
of groups in APMA to four. The three legacy APMA groups have primary responsibility for cases arising under the
business profits and associated enterprises articles of U.S. tax treaties. TAIT endeavors to resolve competent
authority issues arising under all other articles of U.S. tax treaties including issues arising under U.S. tax treaties
relating to estate and gift taxes. As such, TAIT is separate from APMA’s APA program, and the total numbers of
team leaders and managers handling APA cases do not include TAIT analysts and managers.

Part II. APMA Program Statistical Data
[Pub. L. 106-170 § 521(b)(2)(C)(i-viii)]

Table 1: APA Applications Filed
§ 521(b)(2)(C)(i)
Unilateral Bilateral Multilateral Total
Filed 1991-1999
3
401
Filed 2000-2023 692 2,143 50 2,885
Filed in 2024 21 142 6 169
Total Filed 1991-2024 3,455

The charts above illustrate the number of complete applications filed per year and the percentage
of bilateral requests received in 2024 per foreign country. As of December 31, 2024, APMA had
also received 42 user fee filings that were not yet accompanied by a substantially complete APA
application, in addition to the 169 complete APA applications.

3
The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number
of applications for those years by submission type, so the cumulative totals cannot be reported in that manner.
0
50
100
150
200
250
2015201620172018201920202021202220232024
Applications Filed
2015-2024
Japan
32%
India
26%
Canada
10%
Mexico
6%
Germany
5%
France
4%
Italy
4%
Korea
4%
Netherlands
3%
All Other Countries
6%
Bilateral APAs
Filed by Country 2024

Table 2: Executed
4
and Pending APAs
§ 521(b)(2)(C)(ii-vi)
Unilateral Bilateral Multilateral Total
Total Executed 1991-2023 721 1,679 24 2,424
Total Executed in 2024 13 119 10 142
Total Executed 1991-2024 734 1,798 34 2,566

Total Pending as of 12/31/2024 51 485 24 560

Renewals Executed in 2024
5
11 65 7 83
Renewals Pending
6
as of 12/31/2024 41 218 8 267

In 2024, the percentage of APA renewals executed increased (58 percent of all APAs executed in
2024 versus 47 percent of all APAs executed in 2023). The charts above illustrate trends in the
number of APAs executed per year and the countries involved in the bilateral APAs that were
executed in 2024.

4
“Executed APAs” refers to APAs that were finalized and includes both initial and renewal APAs.
5
The number of renewals executed is included in the total number of APAs executed during the year.
6
The number of renewals still pending as of year-end is also included in the total number of pending APAs.
0
20
40
60
80
100
120
140
160
2015201620172018201920202021202220232024
APAs Executed
2015-2024
India
29%
Japan
23%
Italy
11%
Canada
6%
Korea
5%
Mexico
5%
Germany
4%
Netherlands
4%
France
4%
Switzerland
3%
United Kingdom
3%
All Other Countries
3%
Bilateral APAs
Executed by Country 2024

As the top chart illustrates, the number of pending requests increased slightly relative to
December 31, 2023. As of December 31, 2024, half of the pending bilateral APA requests
involved either Japan or India.

Table 3: APAs Revoked or Cancelled and Applications Withdrawn
§ 521(b)(2)(C)(vii)
Unilateral Bilateral Multilateral Total
Revoked or Cancelled 1991-2000
7
1
Revoked or Cancelled 2001-2023 8 2 0 10
Revoked or Cancelled in 2024 0 0 0 0
Total Revoked or Cancelled 1991-2024 11

Withdrawn 1991-2000
8
49
Withdrawn 2001-2023 78 168 2 248
Withdrawn in 2024 2 15 0 17
Withdrawn 1991-2024 314

7
The first APA Statutory Report, which compiled APA data from 1991-1999, and the second APA Statutory
Report, which compiled APA data for 2000, did not report the cumulative number of applications for those years by
submission type, so the cumulative totals cannot be reported in that manner.
8
See supra note 7.
0
100
200
300
400
500
600
2015201620172018201920202021202220232024
Pending APAs
2015-2024
Japan
28%
India
22%
Canada
13%
Mexico
6%
Korea
5%
Germany
4%
United Kingdom
3%
Italy
3%
All Other Countries
16%
Pending Bilateral APAs
by Country

Table 4: APAs Executed in 2024 by Industry
§ 521(b)(2)(C)(viii)
Industry
Manufacturing 42
Wholesale/Retail Trade 39
Services 29
Management 15
Finance, Insurance and Real Estate 12
All Other Industries 5

Table 4a: Manufacturing APAs Executed in 2024
Type of Manufacturing
Transportation Equipment 13
Computer and Electronic Product 10
Chemical 7
Miscellaneous
9
7
All Other Manufacturing 5

9
Industries in the Miscellaneous Manufacturing subsector (NAICS Code 339) make a wide range of products that
cannot readily be classified in specific NAICS manufacturing subsectors.
Manufacturing
30%
Wholesale/Retail
Trade
27%
Services
20%
Management
11%
Finance, Insurance and Real Estate
8%
All Other Industries
4%
APAs Executed
in 2024 by Industry
Transportation
Equipment
32%
Computer and Electronic
Product
24%
Chemical
16%
Miscellaneous
16%
All Other
Manufacturing
12%
Type of Manufacturing APAs
Executed in 2024

Table 4b: Wholesale/Retail Trade APAs Executed in 2024
Type of Wholesale/Retail Trade
Merchant Wholesalers, Durable Goods 21
Merchant Wholesalers, Nondurable Goods 9
Clothing and Clothing Accessories Stores 4
All Other Wholesalers 5

Merchant
Wholesalers, Durable
Goods
54%
Merchant
Wholesalers,
Nondurable Goods
23%
Clothing and
Clothing Accessories
Stores
10%
All Other
Wholesalers
13%
Type of Wholesale/Retail Trade APAs
Executed in 2024

Part III. General Descriptions of APAs Executed in 2024
[Pub. L. 106-170 § 521(b)(2)(D) and (E)]

Nature of the Relationships
§ 521(b)(2)(D)(i)

As in prior years, more than half of the APAs executed in 2024 involved transactions between
non-U.S. parents and U.S. subsidiaries.

Covered Transactions, Functions and Risks, and Tested Parties
§ 521(b)(2)(D)(ii-iii)

Most of the transactions
10
covered in APAs executed in 2024 involve the sale of tangible goods
or the provision of services. Twenty-two percent of the transactions involve the use of intangible
property, which can be among the most challenging transactions in APMA’s inventory.

In the majority of APAs, the covered transactions involve numerous business functions and risks.
For instance, with respect to functions, APAs involving manufactured products typically involve

10
APAs often cover more than one type of transaction.
Non-U.S. Parent &
U.S. Subsidiary
56%
U.S. Parent &
Non-U.S.
Subsidiary
37%
Sister Companies
6%
All Other Relationships
1%
Relationships between
Controlled Parties
Sale of Tangible
Property into the U.S.
22%
Sale of Tangible
Property from the
U.S.
11%
Use of Intangible Property
by a U.S. Entity
16%
Use of Intangible Property by
a Non-U.S. Entity
6%
Provision of Services
by a U.S. Entity
18%
Provision of Services by a
Non-U.S. Entity
25%
All Other Types of
Transactions
2%
Types of Covered Transactions

a controlled group that conducts research and development (R&D), engages in product design
and engineering, manufactures the product, markets and distributes the product, and performs
support functions such as legal, finance, and human resources. Regarding risks, the controlled
group may assume a variety of risks, including market risks, R&D risks, financial risks, credit
and collection risks, product liability risks, and general business risks. In the APA evaluation
process, a significant amount of time and effort is devoted to understanding how functions and
risks are allocated among the controlled group of companies that are party to the covered
transactions. For methods requiring the selection of a tested party, the tested party chosen
generally will be the least complex of the controlled taxpayers.

Consistent with prior years, U.S. distributors, U.S. manufacturers, and U.S. service providers
combined, comprised a majority of tested parties
11
in 2024, i.e., 59 percent.

Transfer Pricing Methods Used
§ 521(b)(2)(D)(iv)

In 2024, the most commonly used transfer pricing method (TPM) for both the sale of tangible
property and the use of intangible property continued to be the comparable profits
method/transactional net margin method (CPM/TNMM). The CPM/TNMM was used for 78
percent of these types of transactions.

As in recent years, for covered transactions involving tangible and intangible property that used
the CPM/TNMM, the operating margin (OM) is still the most common profit level indicator
(PLI) used to benchmark results. It was used 72 percent of the time. Other PLIs, such as the
Berry Ratio and mark up on total costs, made up the other 28 percent. As used here, “OM” is
defined as the ratio of operating profit to sales,
12
and “Berry Ratio” is defined as the ratio of
gross profit to operating expenses.
13
Most services transactions (91 percent) also used the
CPM/TNMM with the OM and operating profit to operating expense being the most common
PLIs (used 67 percent of the time).

11
Not all the executed APAs involve a tested party. Whether an APA involves a tested party would depend on the
transfer pricing method used.
12
See Treas. Reg. § 1.482-5(b)(4)(ii)(A).
13
See Treas. Reg. § 1.482-5(b)(4)(ii)(B).
U.S. Distributor
39%
Non-U.S. Distributor
8%
U.S. Service Provider
8%
Non-U.S. Service
Provider
31%
U.S. Manufacturer
12%
All Other Types of
Tested Parties
2%
Types of Tested Parties

Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to
Comparables or Tested Party Data
§ 521(b)(2)(D)(v-vii)

For the APAs executed in 2024 that involved the CPM/TNMM with a North American tested
party, the most widely used data source for comparables was Standard and Poor’s
Compustat/Capital IQ database. Different sources were used in other cases (e.g., where the tested
party was not a North American entity or where transaction-based methods were applied). Other
commonly used databases are listed in the table below.

Table 5: Sources of Comparable Data
Bureau van Dijk (BvD) Orbis Capitaline TP
Global Vantage RoyaltySource
ktMINE RoyaltyStat
Ace TP

In making comparability adjustments as identified in Treas. Reg. §§ 1.482-1(d)(2) and 1.482-
5(c)(2)(iv), typical balance sheet adjustments were made in most cases, including, where
appropriate, adjustments for payables, receivables, inventory, and fixed assets. In addition, where
appropriate, adjustments for different accounting practices were made to convert from LIFO to
FIFO inventory accounting, and a small number of cases involved the accounting reclassification
of expenses, e.g., from COGS to operating expenses.

Ranges and Adjustment Mechanisms
§ 521(b)(2)(D)(viii-ix)

Most transactions covered in APAs target an interquartile range as described in Treas. Reg.
§ 1.482-1(e)(2)(iii)(C), a point within the interquartile range, or another targeted arm’s length
range. Where the transaction involves a royalty payment for the use of intangible property, both
specific royalty rates and ranges have been used. Where the covered transaction is the license of
intangible property, and the payment for such transfer would be a royalty based solely on
external comparable uncontrolled transactions, a secondary or confirming method, e.g., a test of
the post-royalty operating margin or cost-plus mark-up, has sometimes also been used. The
testing periods of the APAs executed in 2024 were either a single year, the term of the APA
only, or the term of the APA plus rollback years.

APAs executed in 2024 included several mechanisms for adjusting the tested party’s results
when the results fall outside the agreed range or do not match the point required by the APA.
Examples of the mechanisms used include an adjustment bringing the tested party’s results for a
single year to either the closer edge of the range or the median of the range, an adjustment to
bring the results over the APA term to the closer edge of the range or the median of the range, or
an adjustment to bring the results to a specified point or royalty rate.

Critical Assumptions
§ 521(b)(2)(D)(v)

The model APA used by the IRS (included as Appendix 1 of this report) includes standard
critical assumptions that there will be no material changes to the taxpayer’s business or to its tax
or financial accounting practices during the APA term. Some bilateral cases have also included
critical assumptions tied to the taxpayer’s profitability in a certain year or over the term of the
APA. Pursuant to § 7.06(3) of Rev. Proc. 2015-41, APMA will cancel an APA in the event of a
failure of a critical assumption unless the parties agree to revise the APA.

Term Lengths of APAs Executed in 2024
§ 521(b)(2)(D)(x)

Table 6: Term Lengths of APAs Executed in 2024
Term
Length
(years)
Number of
APAs
1 1
2 2
3 3
4 10
5 56
6 33
7 24
8 7
9 2
11 2
12 1
15 1
Average 6

As described in § 3.03(1) of Rev. Proc. 2015-41, taxpayers should request an APA term that will
cover at least five prospective taxable years and may also request that the APA be “rolled back”
to cover one or more earlier taxable years, although the appropriate APA term is decided on a
case-by-case basis. Of the APAs executed in 2024, 28 percent included rollback years. A
substantial number of APAs with terms of greater than five years were submitted as a request for
a five-year term, and the additional years were agreed to between the taxpayer and the IRS (or, in
the case of a bilateral APA, between the IRS and the foreign government upon the taxpayer’s
request) to ensure a reasonable amount of prospectivity in the APA term.

Amount of Time Taken to Complete New and Renewal APAs
§ 521(b)(2)(E)

Table 7: Months to Complete New and Renewal APAs Executed in 2024

Unilateral Bilateral
Unilateral &
Bilateral
Average Median Average Median Average Median
New
28.9 28.9 45.9 40.8 45.3 40.8
Renewal
24.3 29.3 36.0 30.8 34.5 30.8
New & Renewal
25.0 29.3 40.5 34.8 39.1 33.5

Months to Complete New and Renewal APAs Executed in 2024

Median completion time continued to decrease in 2024 (33.5 months versus 42.0 months in
2023).

Efforts to Ensure Compliance with APAs
§ 521(b)(2)(F)

As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to file annual reports to
demonstrate compliance with the terms and conditions of their APAs. The filing and review of
these annual reports are critical parts of the APA process. Through annual report review, the
APMA Program monitors taxpayer compliance with APAs on a contemporaneous basis. Annual
report review also provides current information on the success or problems associated with the
various TPMs adopted in the APA process.

Nature of Documentation Required in Annual Report
§ 521(b)(2)(D)(xi)

APAs require taxpayers to file timely and complete annual reports describing their operations
and demonstrating compliance with the APA’s terms and conditions. Not every annual report
will include each of the items listed in Appendix C of the Model APA; items are required to be
0.0
10.0
20.0
30.0
40.0
50.0
AverageMedianAverageMedianAverageMedian
UnilateralBilateralUnilateral &
Bilateral
Months to Complete
Type of APA
New
Renewal
New &
Renewal

included where the facts demonstrate a need for such documentation. The requirements for the
information to be included in a specific APA annual report is included in Appendix C of the
executed APA.

Approaches for Sharing of Currency or Other Risks
§ 521(b)(2)(D)(xii)

In appropriate cases, APAs may provide specific approaches for dealing with risks, including
currency risk, such as adjustment mechanisms and/or critical assumptions.

APPENDIX 1– Model APA

ADVANCE PRICING AGREEMENT
between
[Insert Taxpayer’s Name]
and
THE INTERNAL REVENUE SERVICE

PARTIES

The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service
(IRS) and [Insert Taxpayer’s Name], EIN ________.

RECITALS

[Insert Taxpayer Name] is the common parent of an affiliated group filing consolidated
U.S. tax returns (collectively referred to as “Taxpayer”) and is entering into this APA on behalf
of itself and other members of its consolidated group.

Taxpayer’s principal place of business is [City, State]. [Insert general description of
Taxpayer and other relevant parties].

This APA contains the Parties’ agreement on the best method for determining arm’s-
length prices of the Covered Issues under I.R.C. section 482, the Treasury Regulations
thereunder, and any applicable tax treaties.

{If renewal, add} [Taxpayer and IRS previously entered into an APA covering taxable
years ending _____ to ______, executed on ________.]

AGREEMENT

The Parties agree as follows:

1. Covered Issues. This APA applies to the Covered Issues, as defined in Appendix A.

2. Covered Methods. Appendix A sets forth the Covered Methods for the Covered Issues.

3. Term. This APA applies to the APA Term, as defined in Appendix A.

4. Operation.

a. Revenue Procedure 2015-41 governs the interpretation, legal effect, and
administration of this APA.

b. Nonfactual oral and written representations, within the meaning of sections 6.04 and
6.05 of Revenue Procedure 2015-41 (including any proposals to use particular
TPMs), made in conjunction with the APA Request constitute statements made in
compromise negotiations within the meaning of Rule 408 of the Federal Rules of
Evidence.

5. Compliance.

a. Taxpayer must report its taxable income in an amount that is consistent with
Appendix A and all other requirements of this APA on its timely filed U.S. Return.
However, if Taxpayer’s timely filed U.S. Return for any taxable year covered by this
APA (APA Year) is filed prior to, or no later than 60 days after, the effective date of
this APA, then Taxpayer must report its taxable income for that APA Year in an
amount that is consistent with Appendix A and all other requirements of this APA: (i)
on a timely-filed U.S. Return, (ii) on an amended U.S. Return filed no later than 120
days after the effective date of this APA, or (iii) by an alternative means (for
example, by agreed adjustments with the IRS office with examination jurisdiction
over the taxpayer for any APA year currently under examination).

b. {Use or edit the following when U.S. Group or Foreign Group contains more than
one member.} [This APA addresses the arm’s-length nature of prices charged or
received in the aggregate between Taxpayer and Foreign Participants with respect to
the Covered Issues. Except as explicitly provided, this APA does not address and
does not bind the IRS with respect to prices charged or received, or the relative
amounts of income or loss realized, by particular legal entities that are members of
U.S. Group or that are members of Foreign Group.]

c. The IRS will not reconsider any Covered Method but will instead limit any
examination of Taxpayer’s treatment of Covered Issues in their U.S. Return for any
APA Year to, and may require that Taxpayer establish, the following: (i) Taxpayer’s
compliance with the terms and conditions of this APA, (ii) the accuracy of material
representations included in APA annual reports submitted pursuant to this APA, and
(iii) the correctness of the supporting data and computations used to apply the
Covered Method. The IRS may audit and propose adjustments to Taxpayer’s results
as determined under this APA’s Covered Method without affecting the APA’s
validity or applicability. Taxpayer may agree with the proposed adjustments in the
same manner as any other adjustment, in which case the IRS will assess any resulting
additional tax or refund any resulting overpayment of tax accordingly. If it does not
agree with the proposed adjustment, Taxpayer may contest it through available
administrative and judicial procedures. Taxpayer must include the audit adjustments

as finally determined for the purpose of applying the Covered Method and must then
make any resulting APA primary adjustments.

d. If Taxpayer does not comply with the terms and conditions of this APA, then the IRS
may:
i. enforce the terms and conditions of this APA and make or propose
allocations or adjustments under I.R.C. section 482 consistent with this
APA;

ii. cancel or revoke this APA under section 7.06 of Revenue Procedure 2015-
41; or

iii. revise this APA, if the Parties agree.

e. Taxpayer must timely file an Annual Report that includes a signed “penalties of
perjury” declaration for each APA Year in accordance with Appendix C and section
7.02 of Revenue Procedure 2015-41. The Annual Report may be submitted only by
electronic transmission pursuant to paragraph 15 and must include an image of an
original signature or a digital signature that uses encryption techniques to provide
proof of original and unmodified documentation. Taxpayer must file the Annual
Report for all APA Years through the APA Year ending [insert year] by [insert date].
Taxpayer must file the Annual Report for each subsequent APA Year by [insert
month and day] immediately following the close of that APA Year. (If any date falls
on a weekend or holiday, the Annual Report shall be due on the next date that is not a
weekend or holiday.) The IRS may request additional information reasonably
necessary to clarify or complete the Annual Report. Taxpayer will provide such
requested information within 30 days. Additional time may be allowed for good
cause.

f. The IRS will determine whether Taxpayer has complied with this APA based on
Taxpayer’s U.S. Returns, the Financial Statements, and other APA Records, for the
APA Term and any other year necessary to verify compliance. For Taxpayer to
comply with this APA, {use the following or an alternative} an independent certified
public accountant must render an opinion that Taxpayer’s Financial Statements
present fairly, in all material respects, Taxpayer’s financial position under applicable
generally accepted accounting standards.

g. In accordance with section 7.04 of Revenue Procedure 2015-41, Taxpayer will (1)
maintain the APA Records, and (2) make them available to the IRS in connection
with an examination under section 7.03. Compliance with this subparagraph
constitutes compliance with the record-maintenance provisions of I.R.C. sections
6038A and 6038C for the Covered Issues for any taxable year during the APA Term.

h. The True Taxable Income within the meaning of Treasury Regulations sections
1.482-1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated
return will be determined under the I.R.C. section 1502 Treasury Regulations.

i. {Optional for US Parent Signatories} To the extent that Taxpayer’s compliance with
this APA depends on certain acts of Foreign Group members, Taxpayer will ensure
that each Foreign Group member will perform such acts.

6. Critical Assumptions. This APA’s critical assumptions, within the meaning of Revenue
Procedure 2015-41, section 1.04, appear in Appendix B. If any critical assumption has not
been met, then Revenue Procedure 2015-41, section 7.06, governs.

7. Disclosure. An APA, any background information relating to the APA, and the taxpayer’s
APA request and any supplementary materials submitted in conjunction with the APA
request are subject to various sections of the I.R.C. and U.S. competent authority treaty
obligations as more fully explained in section 9 of Rev. Proc. 2015-41.

8. Disputes. If a dispute arises concerning the interpretation of this APA, the Parties will seek a
resolution by the IRS’s Director, Treaty and Transfer Pricing Operations, to the extent
reasonably practicable, before seeking alternative remedies.

9. Materiality. In this APA the terms “material” and “materially” will be interpreted
consistently with the definition of “material facts” in Revenue Procedure 2015-41, section
7.06(4).
10. Section Captions. This APA’s section captions, which appear in italics, are for convenience
and reference only. The captions do not affect in any way the interpretation or application of
this APA.

11. Terms and Definitions. Unless otherwise specified, terms in the plural include the singular
and vice versa. Appendix D contains definitions for capitalized terms not elsewhere defined
in this APA.

12. Entire Agreement and Severability. This APA is the complete statement of the Parties’
agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision
in this APA to approximate the Parties’ intent as nearly as possible.

13. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest
to Taxpayer.

14. Notice. Any notices required by this APA or Revenue Procedure 2015-41 must be in writing.
Taxpayer will send notices to the IRS at:
Commissioner, Large Business and International Division
Internal Revenue Service
1111 Constitution Avenue, NW
SE:LB:TTPO:APMA:K:APMA Director
Washington, DC 20224
(Attention: APMA)

The IRS will send notices to the taxpayer at:

Taxpayer Corporation
Attn: Jane Doe, Sr. Vice President (Taxes)
1000 Any Road
Any City, USA 10000
(phone: __________)

15. Submission by electronic transmission. The form of electronic document transmittal will be
one of the three alternatives described below. Regardless of the transmittal mode, Taxpayer
must contact APMA by email at lbi.ttpo.apma.feedback@irs.gov
to
initiate the mode.
a. Taxpayer-Licensed Secure Portal. APMA prefers to send and receive documents
to/from taxpayers through a taxpayer-licensed secure portal as this provides the
highest degree of protection.

b. Email with encrypted attachments. When secure portal mode is not selected,
Taxpayer may send and receive documents to and from APMA by email. Before
employing this document transmittal mode, an APMA employee will authenticate
that Taxpayer initiated the mode at the email noted above. After authentication,
Taxpayer must then submit consent to transmit encrypted documents by email in the
following form:
"I consent to receive encrypted documents by email from APMA employees for the
duration of this APA/MAP request."
c. Unencrypted email. Communication by unencrypted email is not secure, and
therefore not encouraged. However, if Taxpayer chooses this mode, Taxpayer
should:
i. Exclude sensitive information, including portions of Taxpayer’s TIN or
name, from the subject line and body of emails.
ii. Transmit any potentially sensitive information, including personally
identifiable information, only via encrypted, password-protected
attachments.
The User Guide at
Sign and Send Documents Electronically | Internal Revenue Service
(irs.gov) contains additional information about encrypting files and sending documents to IRS by
email.

16. Effective Date and Counterparts. This APA is effective starting on the date, or later date of
the dates, upon which all Parties execute this APA. The Parties may execute this APA in
counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

[Taxpayer Name in all caps]

By: ___________________________ Date: _______________, 202___
Jane Doe
Sr. Vice President (Taxes)

IRS

By: ___________________________ Date: _______________, 202___
John M. Wall
Director, APMA Program

APPENDIX A

COVERED ISSUES AND COVERED METHOD

1. Covered Issues.

[Define the Covered Issues.]

2. APA Term.

This APA applies to Taxpayer’s taxable years ending __________ through ________ (APA
Term).

3. Covered Methods.

{Note: If appropriate, adapt language from the following examples.}

[The Tested Party is __________.]

CUP Method

The covered method is the comparable uncontrolled price (CUP) method. The Arm’s Length
Range of the price charged for _________ is between _______ and ___________ per unit.

CUT Method

The covered method is the CUT Method. The Arm’s Length Range of the royalty charged
for the license of ______is between ____% and ___ % of [Taxpayer’s, Foreign Participants’,
or other specified party’s] Net Sales Revenue. [Insert definition of net sales revenue or other
royalty base.]

Resale Price Method (RPM)

The covered method is the resale price method (RPM). The Tested Party’s Gross Margin for
any APA Year is defined as follows: the Tested Party’s gross profit divided by its sales
revenue (as those terms are defined in Treasury Regulations sections 1.482-5(d)(1) and (2))
for that APA Year. The Arm’s Length Range is between ____% and ___ %, and the Median
of the Arm’s Length Range is ___%.

Cost Plus Method

The covered method is the cost plus method. The Tested Party’s Cost Plus Markup is
defined as follows for any APA Year: the Tested Party’s ratio of gross profit to production
costs (as those terms are defined in Treasury Regulations sections 1.482-3(d)(1) and (2)) for
that APA Year. The Arm’s Length Range is between ___% and___%, and the Median of the
Arm’s Length Range is___%.

CPM with Berry Ratio PLI

The covered method is the comparable profits method (CPM). The profit level indicator is a
Berry Ratio. The Tested Party’s Berry Ratio is defined as follows for any APA Year: the
Tested Party’s gross profit divided by its operating expenses (as those terms are defined in
Treasury Regulations sections 1.482-5(d)(2) and (3)) for that APA Year. The Arm’s Length
Range is between ___ % and ___%, and the Median of the Arm’s Length Range is ___%

CPM using an Operating Margin PLI

The covered method is the comparable profits method (CPM). The profit level indicator is
an operating margin. The Tested Party’s Operating Margin is defined as follows for any
APA Year: the Tested Party’s operating profit divided by its sales revenue (as those terms
are defined in Treasury Regulations section 1.482-5(d)(1) and (4)) for that APA Year. The
Arm’s Length Range is between ____% and ___ %, and the Median of the Arm’s Length
Range is ___.

CPM using a Three-year Rolling Average Operating Margin PLI

The covered method is the comparable profits method (CPM). The profit level indicator is
an operating margin. The Tested Party’s Three-Year Rolling Average operating margin is
defined as follows for any APA Year: the sum of the Tested Party’s operating profit (within
the meaning of Treasury Regulations section 1.482-5(d)(4) for that APA Year and the two
preceding years, divided by the sum of its sales revenue (within the meaning of Treasury
Regulations section 1.482-5(d)(1)) for that APA Year and the two preceding years. The
Arm’s Length Range is between ____% and ____%, and the Median of the Arm’s Length
Range is ___%.

Residual Profit Split Method

The covered method is the residual profit split method. [Insert description of routine profit
level determinations and residual profit-split mechanism].

[Insert additional provisions as needed.]

4. Application of Covered Method.

For any APA Year, if the results of Taxpayer’s actual transactions produce a [price per unit,
royalty rate for the Covered Issues] [or] [Gross Margin, Cost Plus Markup, Berry Ratio,
Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party]
within the Arm’s Length Range, then the amounts reported on Taxpayer’s U.S. Return must
clearly reflect such results.

For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit,
royalty rate] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-
Year Rolling Average Operating Margin for the Tested Party] outside the Arm’s Length
Range, then amounts reported on Taxpayer’s U.S. Return must clearly reflect an adjustment
that brings the [price per unit, royalty rate] [or] [Tested Party’s Gross Margin, Cost Plus
Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin] to
the Median.

For purposes of this Appendix A, the “results of Taxpayer’s actual transactions” means the
results reflected in Taxpayer’s and Tested Party’s books and records as computed under
applicable generally accepted accounting standards [insert another relevant accounting
standard if applicable], with the following adjustments:

1. [The fair value of stock-based compensation as disclosed in the Tested Party’s audited
Financial Statements shall be treated as an operating expense]; and

2. To the extent that the results in any prior APA Year are relevant (for example, to
compute a multi-year average), such results shall be adjusted to reflect the amount of any
adjustment made for that prior APA Year under this Appendix A.

5. Conforming Adjustments

If Taxpayer makes an adjustment under paragraph 4 of this Appendix A (an “APA primary
adjustment”, see Revenue Procedure 2015-41, section 7.01(1)), a conforming adjustment will
be required as specified in Revenue Procedure 2015-41, section 7.01(2)(a). For this purpose,
if there are multiple APA primary adjustments for an APA Year, those adjustments will first
be netted to derive a net APA primary adjustment, for which a conforming adjustment will be
required. In some cases, the conforming adjustment can be accomplished by a repatriation of
funds as specified in Revenue Procedure 2015-41, section 7.01(2). Except as specified in
this APA, conforming adjustments (including any repatriation of funds) are governed by the
applicable rules under the I.R.C., including Rev. Proc. 99-32, 1992-2 C.B. 296, or successor
guidance.

[Per Revenue Procedure 2015-41, section 7.01(2)(d), the APA “will specify the terms
of conforming adjustments, including, but not limited to, the terms of any repatriation of
funds.” Also, any deviation from the treatment under the Code (e.g., no interest on
repatriation payments) must be specified in the APA and must be pursuant to a competent
authority resolution (see Revenue Procedure 2015-41, section 7.01(2)(b)).]

APPENDIX B

CRITICAL ASSUMPTIONS

This APA’s critical assumptions are:
1. The business activities, functions performed, risks assumed, assets employed, and financial
and tax accounting methods and classifications [and methods of estimation] of Taxpayer in
relation to the Covered Issues will remain materially the same as described or used in
Taxpayer’s APA Request. A mere change in business results will not be a material change.

[Insert additional provisions as needed.]

APPENDIX C

APA RECORDS AND ANNUAL REPORT

APA Records

The APA Records will consist of all documents listed below for inclusion in the Annual Report,
as well as all documents, notes, work papers, records, or other writings that support the
information provided in such documents.

Annual Report

The Annual Report will include:
1. A properly completed APA Annual Report Summary in the form of Appendix E to this APA;

2. A table of contents, organized as follows; and

3. Statements that fully identify, describe, analyze, and explain:
a. All material differences between the U.S. Group’s business operations (including
functions, risks assumed, markets, contractual terms, economic conditions, property,
services, and assets employed) during the APA Year from the business operations
described in the APA Request. If there have been no material differences, the Annual
Report will include a statement to that effect.

b. All material differences between the U.S. Group’s accounting methods and
classifications, and methods of estimation used during the APA Year, from those
described or used in the APA Request. If any change was made to conform to
changes in applicable generally accepted accounting standards (or other relevant
accounting standards) Taxpayer will specifically identify the change. If there has
been no material change in accounting methods and classifications or methods of
estimation, the Annual Report will include a statement to that effect.

c. Any change to the Taxpayer notice information in paragraph 14 of this APA.

d. Any failure to meet any critical assumption. If there has been no failure, the Annual
Report will include a statement to that effect.

e. Whether or not material information submitted while the APA Request was pending
is discovered to be false, incorrect, or incomplete.

f. Any change to any entity classification for federal income tax purposes (including
any change that causes an entity to be disregarded for federal income tax purposes) of

any Worldwide Group member that is a party to the Covered Issues or is otherwise
relevant to the covered method.

g. The following regarding any APA primary adjustments made under Appendix A for
the APA Year:

i. The amounts of any APA primary adjustments;

ii.The circumstances that led to such APA primary adjustments being necessary;

iii.A calculation of the net APA primary adjustment as defined in Appendix A;

iv.A complete description of the means by which the conforming adjustment
(seeAppendix A) is accomplished, including:

A. a description of any accounts payable established in connection with a
repatriation of funds pursuant to paragraph 5 of Appendix A and section
7.01(2) of Revenue Procedure 2015-41, including the entities involved and
when the payables are established;

B. a description of any amounts paid or deemed paid (including amounts paid in
satisfaction of such accounts payable), that specifies the entities involved,
when the amounts are paid or deemed paid, and by what means any amounts
are actually paid;

C. the character (such as capital, ordinary, income, expense, dividend,
contribution to capital) and country source of any payments and deemed
payments, and the specific affected line item(s) of any affected U.S. Return.

h. The amounts, description, reason for, and financial analysis of any book-tax
difference relevant to the covered method for the APA Year, as reflected on Schedule
M-1 or Schedule M-3 of the U.S. Return for the APA Year.

i. Whether Taxpayer contemplates requesting, or has requested, to renew, modify, or
cancel the APA.

4. The Financial Statements, and any necessary account detail to show compliance with the
covered method, including consolidating financial statements, segmented financial data,
records from the general ledger, or similar information if the assets, liabilities, income, or
expenses relevant to showing compliance with the covered method are a subset of the
assets, liabilities, income, or expenses presented in the Financial Statements.

5. {Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy
of the independent certified public accountant's opinion required by paragraph 5(f) of this
APA.

6. A financial analysis that reflects Taxpayer’s covered method calculations for the APA
Year. The calculations must reconcile with and reference the information required under
item 4 above in sufficient account detail to allow the IRS to determine whether Taxpayer
has complied with the covered method.

7. An organizational chart for the Worldwide Group, revised annually to reflect all
ownership or structural changes of entities that are parties to the Covered Issues or are
otherwise relevant to the covered method.

8. A copy of the APA and any amendment.

9. A penalty of perjury statement, executed in accordance with Revenue Procedure 2015-41,
section 7.02(8) and (9).

APPENDIX D

DEFINITIONS

The following definitions control for all purposes of this APA. The definitions appear
alphabetically below:

Term

Definition

Annual Report

An APA annual report within the meaning of Revenue Procedure
2015-41, sections 1.04 and 7.02.

APA

This Advance Pricing Agreement, which is an “advance pricing
agreement” within the meaning of Revenue Procedure 2015-41,
section 1.04.

APA Records

The records specified in Revenue Procedure 2015-41, section 7.04
and Appendix C of this APA.

APA Request

Taxpayer’s request for this APA dated _________, including any
amendments or supplemental or additional information thereto.

APA Year

This term is defined in Appendix A of this APA.
Applicable generally
accepted accounting
standards
As the context requires, United States Generally Accepted Accounting
Principles, International Financial Accounting Standards, or similar
pronouncements to which reporting enterprises are obliged to conform
in preparing financial statements for investors, creditors, and
governmental agencies.

Covered Issue(s)

This term is defined in Appendix A of this APA.

Covered Method(s)

Transfer Pricing Method described in Appendix A of this APA.

Financial Statements

As the context requires, those financial statements prepared in
accordance with applicable generally accepted accounting standards,
and any necessary account detail to show compliance with the
covered method, including consolidating financial statements,
segmented financial data, records from the general ledger, or similar
information if the assets, liabilities, income, or expenses relevant to
showing compliance with the covered method are a subset of the
assets, liabilities, income, or expenses presented in the Financial
Statements.

Term

Definition

Foreign Group

Worldwide Group members that are not U.S. persons.

Foreign Participants

[name the foreign entities involved in Covered Issues].

I.R.C.

The Internal Revenue Code of 1986, 26 U.S.C., as amended.

Pub. L. 106-170

The Ticket to Work and Work Incentives Improvement Act of 1999.

Revenue Procedure
2015-41

Rev. Proc. 2015-41, 2015-35 IRB 263.

Transfer Pricing
Method (TPM)

A transfer pricing method within the meaning of Treasury Regulations
section 1.482-1(b).

U.S. GAAP

U.S. generally accepted accounting principles.

U.S. Group

Worldwide Group members that are U.S. persons.

U.S. Return

For each taxable year, the “returns with respect to income taxes under
subtitle A” that Taxpayer must “make” in accordance with I.R.C.
section 6012. {Or substitute for partnership: For each taxable year,
the “return” that Taxpayer must “make” in accordance with I.R.C.
section 6031.}
Worldwide Group Taxpayer and all organizations, trades, businesses, entities, or
branches (whether or not incorporated, organized in the United States,
or affiliated) owned or controlled directly or indirectly by the same
interests.

APPENDIX E

APA ANNUAL REPORT SUMMARY FORM

The APA Annual Report Summary on the next page is a required APA Record. The
APA Team Leader supplies some of the information requested on the form. Taxpayer is to
supply the remaining information requested by the form and submit the form as part of its
Annual Report.

Internal Revenue Service APMA Case No.

Large Business and International Division Reviewer

Treaty & Transfer Pricing Operations Team Leader

Advance Pricing Mutual Agreement Program Economist

Other APA
Team Members

APA Information
U.S. Taxpayer’s Name

U.S. Taxpayer’s EIN

U.S. Taxpayer’s NAICS

Unilateral/Bilateral/Multilateral

Original or Renewal

APA Common Name, if any

APA Request Filing Date

Date APA Executed

APA Term (date-to-date, inclusive)

Foreign Country(ies) Involved

Annual Report Due Dates for years ending on or before [date]:
Annual Report Due Dates for other years: [last month of tax year] 15 following close of year
Covered Methods Summary Description

(e.g., CPM, operating margin 2%-5%)
Taxpayer’s Principal Representative

APA Annual Report Information
Year(s) covered by this Annual Report

Issues for APMA’s special attention (or “None”)

Taxpayer Notice Person Name

Title

If necessary, include a Address

current Form 2848 for the City/State/Zip

Notice Person Phone/Fax

Current Representative, if any Name

Title

Include a current Form 2848 Address

for the representative City/State/Zip

Phone/Fax

Date Annual Report Filed (to be filled in by APMA):

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